Unions Temporarily Halt Effort to Block Chicago on Reforms

CHICAGO - Litigation seeking to block Chicago from implementing its 2014 pension overhaul until a legal challenge is decided was put on hold at the plaintiffs' request.

Cook County Circuit Court Judge Rita M. Novak issued the order on Feb. 19. The delay is tied to the Illinois Supreme Court's recent announcement setting March 11 as the date for oral arguments on the constitutionality of state pension reforms approved in 2013.

Plaintiffs in the city case - which includes unions and retirees -- asked for a stay as the state case stands to impact their litigation. They had been seeking a preliminary injunction halting the city's implementation of reforms to its municipal employee and laborers' funds that had started Jan. 1. The judge had been hearing evidence from both sides over the course of the last month on the preliminary injunction request.

The city's attorneys have argued that the Chicago's reforms could withstand a constitutional challenge on their own merit even if Illinois justices reject a state argument that its sovereign police powers allow it to alter its contract with employees and retirees on retirement benefits.

A Sangamon County Circuit Court judge last year overturned the state reforms and the high court will hear the state's appeal next month. Chicago lawyers contend the city had to act on reforms because its funds are facing future insolvency based on contributions set in statute.

Chicago faces two lawsuits filed late last year over its pension overhaul. Both argue the benefit cuts, including cost-of-living-adjustments, violate the state constitution's protections against impairing and diminishing pension benefits.

The legislation calls for higher city and employee contributions and some benefit cuts, including a reduction in existing annual cost-of-living increases. The legislation imposes a five-year ramp up period in contributions to 2020, with city contributions growing to reach an actuarially required contribution level that puts the funds on course to a 90% funded ratio in 40 years. Contribution levels were previously set in statute and often fall short of actuarially required levels.

The legislation includes a provision that gives unions the right to sue should the city fall short of its required contribution levels. The city has blamed its $20 billion of unfunded pension obligations for its credit deterioration.

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